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The Federal Housing Finance Agency Office of Inspector General (FHFA OIG) overall approves of Fannie Mae's $11.6 billion settlement earlier this year, though it does raise some questions regarding FHFA's treatment of compensatory fees and servicing transfers.
After more than a year of negotiating, Fannie Mae reached an $11.6 billion settlement with Bank of America regarding losses the GSE incurred from Bank of America and Countrywide loans. Bank of America acquired Countrywide in 2008.
FHFA, per a recommendation from the OIG, issued new guidance for repurchase settlement agreements in June of last year.
The Bank of America settlement was OIG's first chance to review the implementation of the new guidance.
FHFA, to its credit, adhered to its established policy in reviewing the representation and warranty settlement between Fannie Mae and Bank of America, the OIG stated.
Its policy did not apply, however, to the resolution of compensatory fees and the transfer of mortgage servicing, the OIG continued.
FHFA OIG believes FHFA needs to establish set guidance for compensatory fees.
Another concern the OIG labeled is the transfer of servicing rights to specialty servicers.
While this was not an official part of the Bank of America settlement, ""Fannie Mae would not consent to Bank of America's proposed transfer of the MSR until Bank of America agreed to a resolution of Fannie Mae's claims for compensatory fees,"" OIG stated in its ""report."":http://origin.www.fhfaoig.gov/Content/Files/EVL-2013-009.pdf
The OIG report released this week was not the first time concerns were voiced regarding the GSEs' transfer of servicing rights.
The rapid growth of specialty servicers in the market increased Fannie Mae's operational risk, particularly in light of the fact that Bank of America had plans to transfer significant servicing portfolios to these entities, OIG stated.
The OIG suggests there are several opportunities for improvement among FHFA's guidelines. Specifically it suggests FHFA establish guidance for compensatory fees and significant MSR transactions.
